Australian's are prepared for rate rises, and will not be pushed into defaults, says one leading financial expert.
The assistant governor of the Reserve Bank of Australia, Philip Lowe, says home owners know rates are at historically low levels and have been enjoying it while it lasts, but are fully aware that these low levels could not last forever.
Mr Lowe was speaking at a Citi Australian Investment Conference, and said that most first home buyers understood that interest rates would soon increase.
"By and large, the Australian lenders have been very careful, and I think that they've continued to do that, and most borrowers understand that the current level of interest rates, or the rate we've had just recently, is not likely to be sustained and I think have planned appropriately for that." he told the conference.
Dr Lowe also talked about the housing shortage that was current in Australia and pointed to this as one of the main reasons for increasing house prices. He cites our growing population as a major issue for housing markets and said although the number of people in each property had been growing, this is not really what people want.
His comments in general about the Australian economy certainly pointed to another rate hike in November.
In the short-term, according to Dr Lowe, Australia's rate of inflation is coming down broadly in line with Reserve Bank forecasts, however inflation is a factor that the RBA monitors extremely closely and will adjust official interest rates accordingly.
Financial markets are predicting official interest rates to rise by an further 2 percentage points within 12 months, and most lenders will almost certainly pass these increases on to mortgage holders.
But recent data indicates that home owners have been overpaying their mortgages for several months now, and have built up savings which can add as a buffer when rates rise above their current levels. Many households have been making extra repayments while rates have been so low, giving hope that there will be few defaults on mortgages next year.
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